Pulp, lumber will survive difficult in 2009: economist

   Moscow. Dec 16, 2008. /Lesprom.com/. Canada, should stick to its guns on environmentally sound forestry, economist Valérie Poulin with the Conference Board of Canada said. Managing the resource with a view to the future, and making new products that people want, more efficiently, will allow the Canadian industry to survive competition from low-cost countries, she said in an interview from Toronto about her report on the outlook for the pulp and paper industry in 2009.

Acquisitions and consolidations will continue through 2009 as North America copes with its capacity to produce paper beyond what the world market demands, especially from countries such as Canada with higher costs than, for example, China or Brazil.

Nobody is planning to add to pulp and paper capacity in Canada, she said. "There is still an over-production, we are producing more paper than people are willing to buy," Poulin said.

A lower value on the loonie will help the Canadian industry, she added.

However, the "migration" of classified advertising from newspapers to the Internet and a shortage of residual sawmill chips will challenge the pulp and paper industry here.

Total paper production will drop by the end of this year over 2007, and drop further in 2009, she projected.

"This is a big policy concern that the government will have to address," she said when asked how a small province with an out-sized forestry sector can cope.

The lower loonie will help, the same as it will the paper industry. American housing starts are "stabilizing," but Canadian starts will fall in 2009.

The drop in American demand over the past couple of years has pushed lumber prices down to a 15-year low, she said.

The lumber industry, more than pulp and paper, includes smaller operations, some of them in the same family for generations, Poulin noted.

She said these mills could do better by finding out what products customers overseas want, and "start producing this new product" rather than attempt to force the products they traditionally make into new markets.

In the pulp and paper industry, she praised companies that find ways to reduce energy consumption and to incorporate recycled stock into improved products.

Newsprint might have a limited future, but office printers still consume copious reams, she said.

Lax environmental rules elsewhere give some mills in other countries a short-term advantage over Canada, but 'green' products can fetch a premium price, she said.